Citigroup - All posts tagged Citigroup

It is safe to say that this was not a good week for earnings. The bad news from big banks kept coming today when Goldman Sachs (GS) reported before the bell, beating estimates. But big drops in trading revenues scared away investors, sending the shares falling 1.15% in afternoon market action.

Meanwhile other big Wall Street banks that reported this week, including J.P. Morgan Chase & Co. (JPM), Bank of America (BAC) and Citigroup (C) disappointed. As a result of sorry results this week, the S&P 500 financials sector has seen earnings projections for the fourth quarter dip, so now prediction re for a drop of 2.3% from the 5% rise predicted at the beginning of the quarter, according to Christine Short at Estimize.

There were some bright spots within the sector today, with PNC Financial Services Group (PNC), Charles Schwab (SCHW) and SunTrust Banks (STI) all beating on the bottom -line.

But is it time to buy big banks?

As Goldman Sachs analyst Richard Ramsden argues that the selloff presents an “attractive entry point.” As he writes:

Catching a falling knife is dangerous, but there is support here. While we are lowering our estimates for the group post 4Q earnings (2%/3% for 2015/2016), we think the recent sell-off (the group is down 11% YTD vs. S&P 500 -3%) provides an attractive entry point. While we acknowledge 2015 could be a challenging year if the rate curve stays where it is, we believe: 1) valuation at only 10.5x 2016 EPS will provide support (particularly once dividends increase post CCAR), 2) the rebound in consumer loan demand appears to be taking hold (which disproportionately benefits large-caps), 3) stocks have rebounded after the past several rate sell-offs, and 4) the US macro recovery is likely more stable than the market is pricing in.

Major U.S. stock indices finished a volatile session by extended their losing streak to a fifth straight day amid a shocking move by Swiss central bankers and disappointing earnings reports from two big banks.

The Dow Jones Industrial Average fell more than 100 points, or 0.6% to end the day at 17,321. The S&P 500 closed at 1,993, after falling 18.57 points, or 0.9% and the Nasdaq fell 68 points, or 1.47% to close at 4,571.

So far, the fourth quarter has been a letdown for big banks. Today, Bank of America (BAC) and Citigroup (C) disappointed investors with falling earnings that landed short of Wall Street’s diminished expectations amid legal costs and a drop in trading revenue. BofA fell 5.2% to close at $15.20 and Citigroup dropped 3.7% to end at $47.23

Earlier, markets were rattled after Switzerland’s central bank ditched a three-year-old anchor to the euro, which sent the Swiss franc soaring. Exporters of Swiss goods suffered, with U.S.-listed shares of Swatch Group (SWGAY) rising 5.3%.

Elsewhere, electronics retail giant Best Buy (BBY) fell 14% to close at $34.29 after the company issued dim guidance. And biotech stocks felt pressure from valuations-conscious investors.

Oil prices fell Thursday, after an early increase helped fuel a stock-market advance early today. The price of gold, also seen as a safe-haven asset, rose 2.5% to $1264.70 an ounce.

Volatility continued Thursday with the CBOE Volatility Index, which measures expectations for swings in the S&P 500, climbing 5.7% to 22.73, above the 10-year average.

In corporate news: Lennar (LEN) fell 7.7% after it warned of lower margins in the year ahead, weighing on many homebuilding peers. The iShares U.S Home Construction ETF (ITB) dropped 5% and the SPDR S&P Homebuilders ETF (XHB) declined 4%.

Target (TGT) gained 1.8% to close at $75.67 on news it will exit its money-losing Canadian operations.

Disappointing earnings from big banks are weighing down financial shares today, fuelling a reversal of fortune for the Dow, which fell more than 100 points in lunchtime trading.

The Dow Jones Industrial Average declined 67 points, or 0.38%, to 17,360.01, after earlier losing as much as 129 points. The S&P 500 fell below the 2,000-point mark, dropping 12 points, or 0.6%, to 1,999.4, and the Nasdaq Composite Index dropped 51 points, or 1.1% to 4,587.8.

Recent volatility in the U.S. market continued Thursday with U.S. equities benchmarks switching between gains and losses. Investors have been watching corporate earnings reports, moves in bond and commodity markets and government data for a read on global economic growth.

Meanwhile, Bank of America (BAC) fell 3.9% after it said its fourth-quarter profit fell 11% amid lower trading revenue, while Citigroup (C) fell 4.1% after it said its fourth-quarter profit got weighed down by a massive legal charge and disappointing trading revenue.

Sound familiar? At J.P. Morgan & Co. (JPM) and Bank of America (BAC), similar problems hobbled their fourth-quarter financial results this week. As a result, J.P. Morgan, having closed the books on its 2014 calendar year Wednesday morning, extended yesterday’s losses, falling more than 2% in today’s market action

BofA dropped more than 3%, and sat as the most actively-traded name on the NYSE with 65 million shares changing hands this morning.

Meanwhile, investors are waiting to see what happens when Goldman Sachs (GS) unveiled its fourth-quarter earnings report Friday morning and Morgan Stanley (MS) follows next week.

For the fourth quarter, the bank earned $350 million — including $3.5 billion in legal and repositioning charges — compared with a year-earlier profit of $2.46 billion. That works out to 6 cents per share vs the 9 cents a share, including the charges, expected by the Street.

Swiss stocks tanked and the Swiss franc soared against the Euro after central bankers there ditched a three-year old cap against the euro. The so-called “Swiss shocker,” initially sent European and U.S. stocks falling.

But in the U.S., officials said wholesale prices fell 0.3% in December, while another Labor Department report had a larger-than-expected number of Americans filed for jobless benefits last week.

In the U.S., Bank of American (BAC) and Citigroup (C) both fell in premarket action after posting fourth-quarter financial results

In corporate news, Bank of America reported quarterly profit of 25 cents per share, 6 cents below expectations, with revenue falling below consensus as well. The bank’s results were impacted in part by a drop in fixed income trading revenue. The stock fell 2.3%.

Citigroup also posted fourth-quarter earnings and revenue that fell short of Wall Street’s expectations. The stock fell 1.5%.

The investment advisory firm BlackRock (BLK) earned an adjusted $4.82 per share for its fourth quarter, above estimates of $4.67, although revenue was slightly below consensus. BlackRock also raised its quarterly dividend by 13% and increased its stock buyback program. The shares rose 2.16%.

Lennar (LEN) rose 2% after the home builder beat EPS estimates on inline revenue. Lennar sold more homes at higher prices, and reported a 22% rise in new orders.

Best Buy (BBY) sank 10% after the electronics retailer had better than expected holiday season sales, but also said it would increase spending in order to promote sales growth.

RadioShack (RSH) plunged 26.8% after the electronics retailer may file for bankruptcy protection as soon as next month, according to the Wall Street Journal.

Target (TGT) jumped almost 6% after the retail giant said it’s exiting its money-losing Canada business. The retailer also said it expects fourth-quarter comparable-store sales to rise 3%, ahead of its original guidance of a 2%.

BP (BP) rose 1.7% after the oil company will cut several hundred jobs in its North Sea operations in response to lower oil prices, according to a BBC report.

The two banking giant are set to report fourth-quarter financial results early Wednesday, kicking off a week during which many big players in the financial sector, including Bank of America-Merrill Lynch (BAC), Goldman Sachs (GS) and Citigroup (C) — will release quarterly earnings reports.

As Barclays analyst Jason Goldberg and his team writes:

We expect results in 4Q14 to approximate the same trends we have been highlighting over the past year or so including less-than-desired loan growth, net interest margin pressure, varied fee income trends, controlled expenses though regulatory/legal/restructuring-related costs weighing, benign asset quality metrics, moderate share repurchase activity, and increased capital ratios. While revenue trends will likely remain soft, looking out, we continue to believe the group is levered to any acceleration in economic activity (we view loan growth as a lagging economic indicator) and higher short-term interest rates (net interest margins could begin to expand in 2015 for only the 4th year in the past 21), should that backdrop materialize. In the interim, relatively low loan loss provisions (though bound to move higher, with energy/energy issues potentially emerging), expense measures, and share buyback, should all help.

Typically, Wells Fargo and J.P. Morgan kickoff the quarterly earnings season for big financial stocks. Since the start of 2015, both have fallen in value. But Wells Fargo remains just over 11% above where it sat a year ago, while J.P. Morgan has dropped just over 1% during the past 12 months.

Wells Fargo is expected to report profit per share of 1.02 on revenue of $21.2 billion, closing out the 2014 calendar year. Full-year profit per share is expected to climb to $4.10 on revenue of $84.1 billion. And over the next 12 months, the consensus among analysts surveyed by Thomson Reuters is that the stock will climb to $55 in the next 12 months.

J.P. Morgan, meanwhile, is expected to report fourth-quarter profit of $1.35 a share on revenue of more than $24 billion, closing out the 2014 calendar year. Full-year 2014 profit per share is expected to rise to $5.45 on revenue of $97 billion. The Street sees J.P. Morgan rising to almost $68 by this time next year.

Banc of America and Citigroup report on Thursday Goldman follows on Friday.

Conference call industrywide will focus on the 2015 outlook and interest rates. But investors will also be listening for information on t the impact of falling oil prices. As Goldberg and his team writes:

The price of oil dropped 50% from June through December, including a 25% decline in December. It has fallen another 12% year-to-date. This could impact 4Q14 results and will likely have an effect on full-year 2015 results. While the recent drop in oil prices could be positive for certain aspects of the U.S. economy, overly exposed regions could face adverse trends. While Texas has seen above-average loan growth over the past several years, a drop in oil prices could weigh on the economic outlook of this region. Shale plays on Marcellus (west PA, east OH, WV, NY) and Haynesville (LA) also bear watching. These regions have also seen outsized growth. We will be watching relative unemployment trends and housing statistics in these markets. Additionally possible slowdowns in areas like Russia and Venezuela could weigh on global growth. Furthermore, the drop in commodity prices has adversely impacted the high yield bond market as issuance declines, spreads widen and potential default concerns increase. While energy loans is only roughly 2% of the average banks’ loan portfolio (though CMA/ZION closer to 8%), there are knock-on effects that could adversely impact other industries. Still, lower gas prices help free up consumer resources for everything from new purchases to debt repayment. Every one-cent decline in pump prices puts about $1bn back into consumers’ pockets. As such, while loan growth, investment banking revenues and commercial asset quality could be adversely impacted, consumer asset quality may be positively affected.

Wednesday was a slow day for U.S. economic news, and without major reports to give the market direction, strategists said investors were pausing to re-evaluate after the latest rally to all-time highs. Stocks have recently recovered from a sharp pullback in mid-September and early October. For the year, the Dow has hit 24 closing records and the S&P has closed at 40 highs…Individual-stock news took more of the spotlight than economic factors, traders said. Consumer discretionary stocks rose 0.3%, supported by gains in retailers and home builders amid an ongoing raft of earnings reports.

European shares fell Wednesday amid worries about the outlook for economic growth in the region. Also, the BofE cut its forecasts for growth and inflation and signaled an interest-rate increase is unlikely before the second half of 2015.

Meanwhile, financial stocks took a hit, as six banks— HSBC Holdings PLC (HSBC), Royal Bank of Scotland Group PLC (RBS), UBS AG (UBS), Citigroup (C), J.P. Morgan Chase Co. (JPM) and Bank of America (BAC) —reached a settlement to resolve allegations that they had worked together to try to manipulate the foreign-exchange market to boost their profits.

For more on that, read this post by my colleague Chris Dieterich on the Focus on Funds blog.

Coach (COH) continues to go to heck in a handbag today with the stock hitting its lowest price since 2009 amid a raft of analyst downgrades.

At $34.71 Coach shares fell 2.75% intraday after dropping as much as 3.8% to $34.31.

The luxury handbag retailer told analysts at a meeting Thursday to expect a double-digit drop in revenue for the fiscal year ending June, and continued loss of market share.

The company isn’t just sitting on its hands. Coach plans to close 70 of its stores and update others as part of a new branding strategy which Coach said is “centered on the concept of defining modern luxury.” These measures are to include the near elimination of its factory outlet stores and reduced promotional pricing for its products.

The question now: Is a turnaround possible?

Morgan Stanley’s Kimberly C. Greenberger maintained an Underweight rating but cut her target to $29, calling Coach “a fading brand” and warning that “re-positioning will take years to play out.” She wrote:

Citigroup’s Oliver Chen maintained his Neutral rating but reduced his target to $36. He writes:

We like new product which fills missing key voids in bag silhouettes, has improved texture, weight and presentation of leather, evokes the Coach Code with more thrill, & has an improved merchandising/flow strategy which is more customer-centric core/downtown/uptown. But the COH system reboot is a layer cake of risk given complexity of integration of new product, stores, brand elevation, & multi-channel execution.

Others downgrading or cutting targets included William Blair, which downgraded to Market Perform from Outperform; Goldman Sachs cut its target to $30; Barclays and Canaccord cut their targets to $35;. BMO downgraded to Market Perform from Outperform.

Some bulls remains, but not many. Stifel Nicolaus maintains a Buy on Coach, although it cut its target to $47 per share from $65. Nomura kept its Buy rating but cut its target cut to $45 from $50.

Last month, Citigroup analysts worried that asset management stocks could be vulnerable to a correction amid a weak stock market and weak fund flows.

On Monday, analyst William Katz said it’s time to “take a fresh look” at Artisan Partners Asset Management (APAM). The firm upgraded the stock from Neutral to Buy and raised its price target from $62 to $72, predicting that better flows and margins will drive earnings improvement starting this year. Katz writes:

You do not have to work hard to understand APAM. We see APAM as simple to understand with a superior flow, margin, and FCF return story. Our stress test suggests 2014 is likely to be another year of superior yield, giving investors a favorable growth and income profile…we see APAM as attractive alpha manager that is likely to garner further flow share, notably in higher powered active equities, where industry trends are more mixed.

The news helped send Artisan rising 4.5% to $63.81.

The stock hit a rough patch last month. After reaching a 52-week high at $71.75 on Jan. 22, the shares dropped 19% over the next 12 sessions, falling below the $60 mark.

But “following a deep drive on fundamentals,” Katz has raised his per share earnings estimates for Artisan to $3.19, $3.61 and $4.10 for 2014, 2015 and 2016 respectively. His prior per share earnings estimates were $3.11, $3.46 and $3.87. Katz writes

Armed with superior performance trends overall and across key product suites, APAM seems well poised to generate superior unit growth, with 2014 off to a fast start (including outperformance in January) with further U.S. retail share wins and additional equity gains.

Blue chip stocks suffered their fifth loss in a row Thursday, after upbeat economic data continued to fuel worries that the Fed will soon start to withdraw it stimulus efforts.

The Dow Jones Industrial Average fell more than 68 points, or 0.4% to close at 15,821.5, while the S&P 500 retreated 7.78 points, or 0.4% to end at 1,785.03.

And the Nasdaq Composite dropped 4.8 points, or 0.12% to close the day at 4,033.16.

Stocks lost their footing after initial claims for unemployment benefits fell more than expected and the Commerce Department said the U.S. economy expanded faster than initially thought in the third quarter.

Data reports issued so far this week have included better-than-expected readings from the labor market and manufacturers, reigniting concerns that the Federal Reserve could start reducing its $85-billion-a-month bond-purchase program as early as this month.

The Fed’s easy money policies have been credited with fueling the 2013 stock market rally. Investors worry the gains may not prove sustainable if the Fed eases back its bond buying prematurely.

With stock prices sitting not far off record highs, some investors have opted to lock in profits.

Meanwhile, investors remain focused on the Labor Department’s monthly jobs reports to be released Friday for hints regarding when the Fed may start tapering its stimulus program.

Prices on the 10-year U.S. Treasury fell, sending yields rising to 2.86%.

Gold prices fell, while crude oil prices climbed. Also, the Euro rose against the U.S. dollar.

In corporate news: Morgan Stanley (MS), J.P. Morgan Chase (JPM) and Citigroup (C) were among the worst performing financial stocks, in part because provisions in the Volcker rule that could hamper their trading businesses. Separately, Deutsche Bank reduced its outlook for shares of Morgan Stanley and Citi, saying both could take outsize hits from the expected slowdown in the Fed’s bond-buying program.

Kroger (KR) fell 3.5% to close at $40.06 slipped after the supermarket chain reported identical-store sales continued to increase but at a rate slightly below analysts’ projections.

Dow component Walt Disney (DIS) edged higher after the company announced late Wednesday a 15% increase to its annual dividend to 86 cents a share.

About Stocks To Watch

Earnings reports, corporate strategies and analyst insights are all part of what moves stocks, and they’re all covered by the Stocks to Watch blog. We also look at macro issues, investor sentiments and hidden trends that are affecting the market. Stocks to Watch gives you the full picture of the U.S. stock markets, all day long.

The blog is written by Ben Levisohn, a former stock trader who has covered financial markets for the Wall Street Journal, Bloomberg and BusinessWeek.